Indonesia does not collect taxes from rich people optimally: Sri Mulyani

Finance Minister Sri Mulyadi Indrawati has admitted that the Directorate General of Taxation has not been able to optimally collect taxes from rich people because of regulation constraints.

“I have asked the tax office to study the tax systems of other countries to know whether the collection system for income taxes and value-added taxes – both from individuals and institutions – can be improved,” Sri Mulyani said in Jakarta over the weekend as reported by kontan.co.id.

She said her ministry wanted to revise the regulations on taxation so that the tax system would reflect the justice system.

Under the current system, there are four brackets of income taxes for individuals – people with incomes of more than Rp 50 million (US$3,846) per year (5 percent tariff), people with incomes more than Rp 50 million but less than Rp 250 million (15 percent tariff), people with incomes more than Rp 250 million but less than Rp 500 million (25 percent tariff) and people with incomes of more than Rp 500 million (30 percent tariff).

“The question: How many people have incomes in the highest bracket? Can we collect the tax money optimally?” Sri Mulyani added.

Center for Indonesia Taxation Analysis (CITA) executive director Yustinus Prastowo agreed with the minister that the four brackets of taxpayers as stipulated in the existing regulations had not reflected the justice system in tax collection.

He added that the government needed to make the tax system more progressive, by expanding the number of brackets of taxpayers. (bbn)